Average Reviews:
(More customer reviews)If you love to read works on economics, math and physics and love to assemble models of the world, I cannot recommend this book highly enough. Indeed, if economic models were this much fun when I was an undergraduate, I might have become an economist.
Funny thing though, this was not written by an economist, but by a geophysicist.
It seems physicists and psychologists in particular are writing more interesting economics books these days than economists themselves.
The core focus of the book is a derivation of a market model that includes value investors, momentum investors and the herding effect of individual economic agents acting in a world of partial information. The final model is stunning.
Sornette points out the main problem with predicting bubbles: even if all the signs say "yes," there is still a pretty good chance that the bubble will be self-correcting. Turns out chasing market bubbles is a little like chasing soap bubbles - they may simply disappear at any moment. Thus, the book and the model are of limited use in any type of market timing. Indeed, the model suggests that the market should now be in the tank, and yet it continues to hover on the higher side of its expected range.
As much as I loved the book, there was a slight aftertaste that this was all nothing but a very mathematical and high-minded type of technical analysis. That at base, when all was said and done, this was not all that different from the various "tools" in the chartist's handbook, e.g. MACD, RSI and OBV, etc., etc., etc. The difference may be solely that Sornette knows his statistics and would easily and readily dismiss any model which did not perform significantly different from chance.
Finally, this book will have you trotting out your old high school calculus book. It brought back memories of just how much fun mathematics can be.
All in all - I give it 5 stars.
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